How do you balance the need to offer competitive compensation packages with budget constraints?
You prioritize and determine where the most value is created. The main justification for an employee’s salary and other rewards is the value they create.
For example, if you are a SaaS company, then you may spend more on your software engineers and sales team than other roles.
· Employers may choose to align the total compensation opportunity for these jobs at a higher percentile than the 50th percentile.
· Or they could decide that all employees in these jobs will have a compa-ratio of 95% or more. And that they are okay with employees in other jobs at a 90% or more compa-ratio.
Another approach is to use the employee’s compa-ratio and performance rating.
Priority #1: Employees with a compa-ratio less than 85% and a performance rating of 3 (meets expectations) or higher.
· If you have budget left after spending it on the employees who are in this category, you move to the next priority.
Priority #2: Employees with a compa-ratio less than 90% and a performance rating of 3 (meets expectations) or higher.
· If you have budget left after spending it on the employees who are in this category, you move to the next priority.
Priority #3: Employees with a compa-ratio less than 95% and a performance rating of 5 (consistently exceeds expectations).
You get the idea. What other ways have you prioritized how to spend your salary increase budget?
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